Northvolt files for bankruptcy in setback to Europe’s EV ambitions

Swedish EV battery maker Northvolt has filed for Chapter 11 bankruptcy protection in the US in what is being seen as a big setback to Europe's EV ambitions. 

Northvolt said it has only enough cash to support operations for about a week and it had secured USD 100 million in new financing for the bankruptcy process. Operations would continue as normal during the bankruptcy, it said.

“Northvolt's liquidity picture has become dire,” the company said in its Chapter 11 petition, filed in US Bankruptcy Court in Houston. The company, which has operations in California, has about USD 30 million of cash, which can support its operations for only about a week, according to a Reuters report. It has USD 5.8 billion in debts.

Northvolt employs some 6,600 staff in seven countries. Its restructuring is expected to be completed by the first quarter of 2025.

Europe had been hoping that Northvolt would lessen Western car makers' dependance on Chinese rivals such as battery maker CATL.  

The USD 100 million is part of USD 245 million in financing support for the bankruptcy. Swedish truck maker Scania, its biggest customer, said that it was loaning USD 100 million to Northvolt to back the manufacturing of EV battery cells in Sweden.

"This decisive step will allow Northvolt to continue its mission to establish a homegrown, European industrial base for battery production," Tom Johnstone, interim chairman of Northvolt's board, said.  

The battery manufacturer was not just an important project for Sweden’s “green industrial revolution” but touted as Europe’s answer to imported Chinese batteries and a means of reducing the dependence on oil. 

Since it was founded in 2016, Northvolt rose rapidly, getting billions of dollars in investment and orders from top automakers like Volkswagen and Volvo. 

But the mood soured this year as Europe’s EV market struggled. In June, BMW canceled a USD 2.2 billion contract with Northvolt. Later, the beleaguered battery maker announced plans to cut 1,600 jobs in Sweden as part of a major cost-cutting drive.

In October, a Swedish government agency said that Northvolt’s decision to scrap a major factory expansion in Sweden puts on hold crucial funding for the company that was agreed earlier this year.